BAGHDAD (Reuters) -- The U.S. military in Iraq has come under Iraqi authority for the first time since the U.S.-led invasion ousted Saddam Hussein in 2003, a milestone in the war-weary country's path to restoring sovereignty.

The U.S. force in Iraq, now more than 140,000 strong, had operated since 2003 under a UN Security Council resolution that expired at midnight on New Year's Eve.

Starting January 1, troops are operating with authority granted by the Iraqi government in a pact agreed by Washington and Baghdad.

The pact gives U.S. troops three years to leave Iraq, revokes their power to detain Iraqis without an Iraqi warrant, and subjects contractors and off-duty U.S. troops to Iraqi law.

The new, tough terms of the U.S. presence here were secured by an increasingly confident Prime Minister Nuri al-Maliki, emboldened by a maturing democracy, military victories against Shi'ite militias, and progress against Al-Qaeda militants.

An Iraqi band played bagpipes at a small ceremony on a street surrounded by concrete blast walls and razor wire in the Green Zone, a fortified swath of central Baghdad off limits to most Iraqis, who widely view it as a symbol of occupation.

"I convey the armed forces' vow...that they are able to take full responsibility, so that Iraq again will be secured by the hands of its own citizens," Defense Minister Abd-al Qadir Jassim told dignitaries assembled under a marquee festooned with tinsel and balloons.

U.S. Colonel Steven Ferrari, 50th Infantry Brigade Combat Team commander responsible for American troops in the area, called it "a new day for sovereign Iraq."

"As a sovereign nation, Iraq assumes the full range of security responsibilities for this historically ancient land," Ferrari said.

"The role of the coalition forces [in the Green Zone] will be secondary, centered on training Baghdad brigade troops to use equipment to detect explosives and advising Iraqi forces," Qassim Moussawi, spokesman of Iraqi forces in Baghdad, said.

U.S. troops across Iraq remain under U.S. command but their operations must be authorized by a joint U.S.-Iraqi committee and they can detain Iraqis only with a warrant from an Iraqi judge. They are to leave the streets of Iraqi towns and cities by mid-2009 and withdraw from the country by the end of 2011.

Other U.S.-allied troops, including 4,100 British, are to leave Iraq within seven months.

On December 31, U.S. officials finished vacating the marble Saddam-era palace in the center of the Green Zone that had been the seat of U.S. power in Iraq since 2003.

Some 15,000 prisoners held at U.S. military detention camps must now be charged with crimes under Iraqi law or, according to the security pact, gradually let go.

Reduced Violence

Iraqi forces take over a dramatically different Iraq from the one ravaged by sectarian violence in 2006 and 2007.

Attacks have dropped sharply, thanks partly to an increase of troops ordered by President George W. Bush in 2007 and newfound cooperation from Sunni Arab tribal leaders.

Militants continue to strike, especially with bomb attacks that frequently target civilians. According to official Health Ministry figures, 5,379 civilians were killed during the year, less than a third of the 16,232 killed in 2007 but still an average of nearly 15 a day.

In December, the monthly toll was just 238 killed. The monthly tolls ran close to 2,000 at the height of sectarian fighting between Sunnis and Shi'ites from mid-2006 to mid-2007.

This month will see provincial elections that U.S. and Iraqi officials bill as a milestone toward democracy.

But Iraq remains deeply scarred by the war. Baghdad neighborhoods are divided by checkpoints and concrete walls. Millions of people who fled violence have yet to return home.

Many Iraqis still resent what they see as a U.S. military occupation. They are also hungry for basic services, jobs, and lasting peace. Majid Mola, an engineer, dismissed as meaningless the handover billed by Maliki's government as a major victory.

"Where are the government services? Where is the electricity? People want practical things," he said.

In what could become one of the most enduring images of the U.S. military adventure, Iraqi journalist Muntazer al-Zaidi won applause across the Middle East when he threw his shoes at Bush and called him a "dog" at a recent news conference with al-Maliki.